In this blog, CReAM Researchers and CReAM Fellows comment on recent events and on the current political debate. Below each article you can add comments.

Thursday, 14 September 2017

Fact Check: does immigration have an impact on wages or employment?

By Ian Preston

Centre for Research and Analysis of Migration (CReAM) at University
College London

When I was business secretary
there were up to nine studies that we looked at that took in all the academic
evidence. It showed that immigration had very little impact on wages or
employment. But this was suppressed by the Home Office under Theresa May,
because the results were inconvenient.

Vince Cable, leader of the Liberal Democrats, in a statement on
September 6.

There is quite a lot of
evidence that if we have too many low-skilled workers coming in, one of the
effects is to depress the wages of those at the bottom end of the wage scale.

Damian Green, first secretary of state and minister for
the Cabinet Office, speaking on
BBC Radio 4’s Today programme on September 7.

Some
studies have pointed to the possibility of effects on the distribution of
wages, holding wage growth back at the lower end and pushing wages up at
the higher end. However, authors of studies which have suggested this have
emphasised that the negative effects are small.
While recent immigrants as a whole have typically been highly qualified relative
to the skill level of the UK labour force, the location of such effects may
have to do with the fact that they tend to work initially in lower
paid jobs.

One exception, sometimes
cited by advocates of tighter immigration policy, is a 2012 Migration
Advisory Committee report that
found some association in particular of non-EU migration with employment of
non-immigrants during one period of downturn, though the study itself
emphasises that the
evidence is not
very robust.

Overall the Migration Advisory Committee itself concluded:
“Evidence to date suggests little effect on employment and unemployment of
UK-born workers, but that wages for the low paid may be lowered as a result of
migration, although again this effect is modest.”

Impervious political debate

Despite the weak evidence, harmful labour market effects
continue to be emphasised in political debate, for example by Theresa May both
when she was home
secretary and now as prime
minister. (The same is true in
the US).

Some may feel it is obvious that the expansion of labour
supply that follows from immigration must harm competing workers. But this
ignores the many ways in which immigration can also lead to expanded labour
demand – through immigrants’ spending on goods produced locally, through the
complementary skills they bring into the country, through encouraging changes
in the pattern of production or encouraging inflow of capital, and so on. For
all of these reasons, it is quite compatible with standard economic theory to
find that immigration might have little
or no effect on wages or employment.

Verdict

Vince Cable’s understanding of the preponderance of academic
evidence on the labour market effects of immigration is accurate. There is
little persuasive evidence that immigration has substantial harmful effects on
average UK wages or employment. Damian Green is correct to identify effects on
the least well paid as being of greatest concern but evidence suggests these
effects are not large.

Review

Jonathan Wadsworth, professor of economics at Royal
Holloway, University of London

According to standard economic textbooks, the purported
effects of immigration on the existing workforce are undoubtedly negative –
like the minimum wage. How so when the academic evidence – as accurately
outlined in this fact check – does indeed suggest that, contrary to standard texts,
immigration does not have any large significant effect on employment either in
aggregate or among groups supposedly most at risk? Nor does immigration appear
to depress wages of native-born Britons much. The recently resurrected study,
cited by politicians and the media could not determine whether its findings of
a small negative wage effect apply to UK-born people or immigrants or both.

Politicians and the media making disingenuous, selective or,
at best, misinformed interpretations of academic studies do not help. There is
also a lot of dross out there and sifting through it is not always easy, for
anyone, politicians and the media included. Ultimately, continued dialogue and
engagement between academia and the outside world can only help understanding
and inform policy making.

Ian Preston is the Deputy Research Director of CReAM and
Professor in the Department of Economics at UCL